Foreign Direct Investments (FDI) plays a pivotal role in the economic development of the Maldives. The Maldives aims to transform the country to an economically prosperous, socially inclusive and equitable, climate resilient and regionally connected island nation.
Over the years, the country has continued to develop at a steady pace and remains economically resilient. The mixed economy of the Maldives is generally based on Tourism and the Fisheries industries, which collectively accounts to about a third of the national GDP.
Foreign investors are offered a simple and transparent policy environment. Continuous efforts are being made to make the investment environment more consistent, predictable and transparent.
The Ministry of Economic Development has published its FDI Policies during early 2020, which provides clear guidelines as to which sectors are open for 100% foreign investments, which sectors require partnerships with locals in varying degrees and which sectors are restricted to foreigners based on the government’s protectionism policies.
Over the years, the investment incentives available in the Maldives has made it attractive to foreign investors, including –
- Right to 100% foreign ownership of businesses in major sectors, such as tourist resorts operations.
- Long-term leases of land and islands in the tourism and other sector.
- Long-term contractual agreements in other infrastructure and development sectors.
- Ease of engaging foreign managerial, technical and unskilled workers.
- Choice of law and dispute resolution mechanisms, including international arbitration of disputes, in contractual agreements.
- No foreign exchange restrictions.
- No restrictions on repatriation of profits.
The conducive investment environment of the Maldives has attracted many reputed international brand names, which continues their presence in the country.
TAXATION
In 2011, landmark pieces of legislation related to taxation were passed by the Parliament. Under the Business Profit Tax Act (now repealed and replaced by the Income Tax Act), tax at the rate of 15% is payable before earnings above MVR500,000 (~US$32,425). Further, Goods and Services Tax (GST) were introduced in the same year.
INCOME TAX REGIME
The Business Profit Tax Act has been replaced by the Income Tax Act, which commenced on 1st January 2020. Under the new tax regime:
- Business profits will be subjected to 15% tax on earnings above MVR500,000 (~US$32,425).
- Progressive taxes are payable on remuneration from 1st April 2020 for monthly earnings of above MVR60,000 (~US$3,890) as per the below schedule:
- Tax at the rate of 25% is applicable on banking services.
- Tax residents of Maldives are taxed on their worldwide income, whereas non-residents are taxed on the income derived from within Maldives only.
- Withholding tax rate the rate of 10% applies on certain payments made to non-residents in respect of payments such as royalty, interest, dividends, fees for technical services, commissions, etc.
GOODS AND SERVICES TAX
Under the GST laws, the prevailing tax rates are as follows:
Certain essential items, such as rice, sugar, flour, salt, milk, cooking oil, petrol, diesel, etc. are zero-rated goods and services, thus subject to GST at the rate of 0%.
Subject to conditions, certain goods and services, such as electricity, water facilities, postal services, sewerage facilities, education, health services, day care services, financial services, lease rent from immovable properties, etc. are specifically exempt from GST.
GREEN TAX
Green tax at rate of US$6 per day per guest is payable in respect stays at tourist resorts, tourist hotels, tourist vessels and tourist guesthouses, and at the rate of US$3 per day per guest in respect of stays at tourist guest houses.
OTHER TAXES
Customs import duties are applicable on imported goods. There are various import duty exemptions for commercial projects.
For further details on taxes and import duties in the Maldives, please visit:
Maldives Inland Revenue Authority – https://www.mira.gov.mv/
Maldives Customs Services – https://www.customs.gov.mv/
Maldives Monetary Authority – http://www.mma.gov.mv/
